Did Black Money Fuel Europe's Old Master Boom?

Artforum.com‘s Jennifer Allen brings an interesting story from the Süddeutsche Zeitung written by Stefan Koldehoff that offers an explanation for the sudden and unexpected boom in big ticket sales in Europe this winter. It’s all due to the changes in Swiss banking laws brought about by the UBS case. Without the shield of secrecy, Americans are being forced to change their socked away cash into less liquid but inflation sensitive hard assets:

“Never before has so much black money been spent on the international art market as in the last three months, above all in Europe,” writes Koldehoff. “That explains the anticyclical success of the Yves Saint Laurent auction in February by Christie’s in Paris—and makes the high sales at the TEFAF in Maastricht plausible.”Citing a “New York gallerist,” Koldehoff says that Americans currently see themselves under pressure to spend large sums of money in a short amount of time in Europe. The American financial authorities had threatened to close the American branches of major Swiss banks, should the banks refuse to cooperate with the search for tax evaders. After Switzerland, Austria, Luxembourg, Liechtenstein, Monaco, and the Canary Islands were quick to follow suit. These legal changes can lead to “massive buys,” since American collectors can buy works that have been temporarily taken out of European depots—such as the duty-free warehouses Basel-Drespitz, Zürich-Embraport, Genf-Cointrin, and Chiasso in Switzerland—only to put them back into depots as a kind of long-term deposit, relatively removed from the taxman.

The global anti-inflation trade has yet to yield returns but that’s probably because we’re still in early days of the financial crisis.